Does Facebook Hold Too Much Power Over Advertisers?

Does Facebook Hold Too Much Power Over Advertisers?2017-02-142017-02-14https://www.vertoanalytics.com/wp-content/uploads/2019/03/verto_logo_rgb.pngVerto Analyticshttps://www.vertoanalytics.com/wp-content/uploads/2016/07/CEO-insights.png200px200px

Google and Facebook control about 70% of all mobile advertising revenue combined. While Facebook can provide a great end-to-end experience for advertisers, do they have too much power? Should advertisers call for greater accountability from Facebook and other advertising platforms? If you ask advertisers for their opinion on Facebook as an ad platform, the answers typically fall into two camps: some claim they love Facebook’s measurement products, end-to-end toolkits to optimize campaigns, and the network’s sheer scale and international reach. But others complain that Facebook is no longer a top destination for the next generation of consumers, it lacks adequate offerings for the bespoke or tailored needs of agencies or advertisers, and most importantly – that its credibility as an advertising platform has diminished.

Is mobile advertising turning into a duopolistic market?

Facebook’s credibility as an advertising platform has come into question over the past few months, as the company admitted a series of discrepancies (some quite significant) around the traffic and viewer numbers it reported to advertisers and publishers. Advertisers and consumer advocates alike are calling for greater accountability and transparency from Facebook around the way the company measures video ad views by consumers on its sites and apps. Facebook currently reports its own advertising and traffic metrics without any outside verification. The problem is a matter of trust – are these the only discrepancies, or are there more to come? The underlying problem is that ad platforms like Facebook (as well as other offerings from companies like Google) have grown so large that many in the advertising and publishing industries have started questioning their objectivity and trustworthiness. Is Facebook’s dominance in mobile advertising bound to attract more backlash from major clients, competitors, antitrust bodies, and governments?

Facebook’s recent troubles underscore the need for independent measurement. Validation is a necessary and vital complement to the metrics that Facebook (or any other advertising or publishing platform) provide.

Facebook does not track consumers outside of its own properties: Facebook tracks and reports on what happens within its own properties like facebook.com or Instagram, but little else. They have limited data on sites and apps that are part of the Facebook Audience Network. However, a majority of internet usage still takes place outside of the Facebook ecosystem. To build a complete, truly comprehensive profile of the consumer, total media consumption must be measured.

Facebook may have data, but their interest is not always to maximize the transparency, quality, or relevancy of this data to advertisers. Facebook needs to monetize its ad business, and maximizing its advertising revenue and profit is central to the company’s bottom line. As a result, they’re under pressure to continue delivering results to advertisers when it comes to user reach, engagement, and market share. Facebook’s reported metrics are vital for advertisers, who prioritize advertising platforms and channels based on past and expected performance. As long as Facebook can continue reporting positive numbers, the more advertisers and premium pricing they can attract and retain. For a similar reason, Facebook is not incentivized to immediately or proactively flag discrepancies or errors in metrics. Additionally, while Facebook can provide data such as demographic profiles, advertisers have hard time evaluating the accuracy of the data: for example, what percentage of user activity may be coming from bots or other automated sources?

Facebook faces both internal and external legal scrutiny and underlying limitations sharing certain data with external stakeholders. By law and even by internal processes, Facebook cannot always share, transfer, or utilize its data across multiple business units. For example, even if the technical team had access to the real identities of users (via email address or other personally identifying information), or even if the analytics team could find a better way to measure engagement (compared to more commercial approaches used by product teams who prefer tagging solutions from the advertiser/agency clients), there are legal and commercial reasons which hinder the adoption of such technologies or processes. Faced with these hurdles, certain departments within Facebook or other advertising platforms often rely on data from measurement companies because those numbers can better stand the test of public scrutiny, legal feasibility, and commercial readiness.

But the fault doesn’t lie entirely with Facebook or any of the other large ad platforms. Third-party measurement companies have not always been fast enough to develop new metrics or respond to new distribution methods (such as digital video) or have the necessary scale to provide adequate measurement across multiple countries. Instead, ad platforms and publishers have stepped in themselves. For example, the Nielsen OCR collaboration with Facebook is primarily based on Facebook data, rather than Nielsen’s core measurement – Facebook is effectively working with Nielsen to ultimately help the industry by providing data to the market to fuel advertising industry growth. However, the point is that Facebook, not Nielsen, took the lead – signalling a major conflict of interest moving forward.

Dr. Hannu Verkasalo has founded, built and sold several companies in the digital space. He has also advised more than twenty ventures across the U.S. and Europe and has had two successful exits (Menudata, Zokem). He led the mobile and online research arm for Arbitron acquired by Nielsen in 2011. Hannu holds a Ph.D in mobile analytics and holds master’s degrees in social science, engineering and economics.